Do I have to get pre-approved before I buy a house?

Your First Step to Buying a Home

First-time home buyers can sometimes think that all they need to do to start their home search is to get online and…search. However, there’s one very important step that needs to be done before you begin checking out your local housing market. You’ll need to get pre-approved beforehand.

This article explains what pre-approval is and why it’s so important when buying a home.

Many buyers confuse the term “pre-approval” with “pre-qualification,” but the two terms are vastly different. Pre-qualified means that you have simply been given a round-about guesstimate amount for how much a lender is willing to loan you. Pre-approval means you’ve actually received an official amount from the lender that they’re willing to approve.

What is Pre-approval?

Pre-approval shows the seller that you’re a serious buyer and the lending institution is willing to lend the right amount to you. When you get pre-approved, the lender gives you a pre-approval letter. The letter tells the exact amount that the lender is willing to loan you, and it also certifies that you’ve submitted the right financial documents for pre-approval. Until that time, you’re just a window shopper. Not having a pre-approval letter, could make you miss out on your dream home, especially in today’s highly competitive seller’s market.

Documentation to Submit for Pre-Approval

You’ll want to gather your bank statements, tax records, social security numbers, credit report, along with personal contact information such as full name, phone number, address, employment contact info, and proof of income. A bank or lender will want to see that you’ve been employed continuously for the last two years. Sometimes they make exceptions. 

You will need the following for proof of income:

  • Your 1099s
  • W-2 tax form
  • Pay stubs

Before you do anything, make sure to check your credit report for errors, and if you find any, have them corrected immediately. You’ll want your credit score to be top-notch, so fixing these errors is imperative. According to a Federal Trade Commission study, one in every five U.S. consumers has a credit report error.

Debt-to-Income Ratio

Do you know your DTI? That stands for debt to income ratio which is all your monthly payments from loans and credit cards (not insurance and utilities) divided by your gross monthly income. The gross monthly income is your monthly income before taxes. Knowing this information also helps when it comes to getting pre-approved for a loan. 

Hiring a Property Manager to Help

Getting pre-approval will make you a more powerful buyer, and you’ll have an upper hand above those who are not pre-approved. That’s important in today’s extremely tight housing market. Raleigh is experiencing one of the tightest real estate markets in history, and it’s about to get even tighter with Apple’s impending move to nearby RTP.

It’s a good idea to have a local real estate expert’s advice and knowledge of the local market. Oak City Properties has decades of experience helping buyers and sellers find their next home.

Need Help? 

At Oak City Properties, we have been helping those in the Raleigh area purchase and sell homes for years! Whether you are a family trying to sell your home or a landlord wanting to downsize your rental portfolio, our full-service property management company is here to help.

If you are interested in learning more about our services or speak to our listing agents, give us a call at 919-232-9222 or send us a message.

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